OLDWICK, N.J.--(BUSINESS WIRE)--The U.S. personal automobile insurance industry experienced net premiums
written growth of 5.1% in 2015 to $192.8 billion from $183.5 billion in
2014; however, the industry is exhibiting signs of weakening
underwriting and operating results, mainly driven by rising loss ratios,
according to an A.M. Best special report.

The Best’s Special Report, titled, “Personal Automobile—A
Challenging Road Ahead,” notes that personal automobile underwriting
results generally have been stable. The market represents the largest
component of the U.S. personal lines segment and is a critical line for
many insurance companies, especially ones in the private passenger
standard automobile composite, where personal automobile comprises over
90% of net premiums written (NPW). Nonetheless, underwriting
profitability for the personal automobile industry has shown
deterioration in recent years, as factors such as rising loss frequency
and severity trends, increased competition and weakened economic
conditions have all played key roles in the downturn. The personal
automobile segment recorded a combined ratio in 2015 of 104.6, a
deterioration of 2.2 points from the previous year.

Several of the leading writers of personal automobile insurance have
been among the most profitable, although a high market share has not
equated to strong level of profitability in all cases. The top 10 groups
by NPW accounted for 72% of the industry’s net premium volume in 2015.
The top five each generated more than $10.0 billion in personal
automobile NPW. While just five of the top 10 groups produced five-year
average combined ratios under 100%, most of the top 10 companies have
demonstrated operating profitability by producing five-year average
operating ratios well below 100%.

A.M. Best believes reversing the trend of worsening underwriting results
in the face of current market headwinds will be a challenge for personal
automobile insurers. While higher rates, improved pricing segmentation
and claim initiatives may address some of the near-term financial
pressure on the line, there are emerging issues that may have more
consequential and structural impacts on the personal automobile market
on a longer-term basis. Continued technological innovation, the
evolution of autonomous vehicles, the rise of Uber and Lyft and the
potential growth of non-traditional competitors are just a few of the
developments that personal automobile insurance companies will need to
grapple with in the upcoming years. Those companies that can execute on
the blocking and tackling aspects of underwriting and claims over the
near term, while incorporating the meaningful evaluation of emerging
threats into their enterprise risk management framework, will be the
most well-prepared for today’s automobile market, as well as the future
one.